Following recent press coverage it is clear that there is public appetite (https://www.express.co.uk/news/uk/1290604/social-care-crisis-income-tax-rise-coronavirus-latest) for the reform of funding of long term care, but no guarantees as to if and when this will happen as changes are likely to be costly and require tax increases. In the meantime, Head of Private Client Services, Jerome Dodge, provides his top tips on lawful ways to avoid care home fees.
1. It is possible for couples to protect approximately half of their combined estates
If a Will places the share of property of the first of a couple to die into trust, the survivor has a guaranteed right to use that property for the rest of their life, the arrangement can be transferred to an alternative property and that share of the property is ringfenced from means assessment should the survivor of the couple need long term care.
2. Cash and investments can be protected as well as property
Whilst on the whole clients want the survivor to have complete control of cash assets and for them not to remain within a trust, by allowing cash assets to pass into the trust created by the Will, those cash assets can be swapped by the trustees for an equivalent value of the survivor’s share of the property thereby protecting more than half the property from care home fees.
3. Lifetime gifts generally do not work
The Local Authority has very extensive powers to treat lifetime gifts as an intentional deprivation of assets to avoid care home fees. In fact, there is no time limit on when the gift was made. Planning within Wills is entirely different because if the survivor of a couple needs care, they have not given anything away as they have simply not inherited assets outright from their spouse or partner.
4. Planning only works if it takes place whilst both parties of a couple are alive
As it is difficult to avoid a lifetime gift being treated by the Local Authority as an intentional deprivation of assets to avoid care home fees (particularly if that gift is of part or all of the main residence), it is usually too late to do anything when one of a couple has died, so implementing planning within Wills beforehand is highly advisable.
5. Care home fee reform is uncertain – don’t count on it in the near future.
Although there have been a number of reviews of care home fee funding over many years, nothing of note has happened to change the law despite it widely being accepted that the current system is unfair. It seems to have been the government’s intention to limit the amount people are required to pay for their own care, but priority was given at the last General Election to promising not to raise other taxes instead. With the inevitable financial pressures on central and local government post COVID 19, it is difficult to see how major reform to the care home fee system will be affordable and it seems risky to rely on the law changing in this regard. However, clearly there is a public appetite for such a change and it will be interesting to see how pressure is applied to the government by pressure groups.
For any questions relating to estate planning or care home fees contact our award winning and Legal 500 ranked private client team on 01258 459361.
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